Bad News for the Poor

Yesterday, like millions of other Americans I paid my taxes. Those taxes will increase revenue for the government that will provide many services for the people in the United States. The White House offers a Tax Receipt that spells out how the government will spend that money. I don’t agree with all of it. For example, the US spends 26.3% on national defense. Despite this, I pay this willingly because I know it also pays 24.3% for health care, 21.9% for jobs and family security, 4.8% for education. It also pays for Natural Resources and Environment, for International Affairs and so on.

On the pretext of balancing the budget, Republican leaders are ready to create incredible hardships for people who are poor, older and children including gutting social safety net programs such as Medicaid, Medicare and Social Security. Ezra Klein wrote in the Washington Post on April 12 that more than half of the spending cuts will come from education, labor and health programs. This at a time cities are still reeling under the recession, with unemployment still hovering around 9% (Chicago Sun Times: “Chicago Unemployment Rate Falls to 9.4%”)

In a disappointing set of negotiating moves, President Obama late last year agreed to extend the Bush-era tax cuts for the richest Americans for two years. The estimated cost to the government of that portion of the tax deal, $42 billion this fiscal year, exceeds the stated $38 billion value of the savings from the federal budget cuts lawmakers approved last week. The tax cut for the rich, therefore, effectively creates a tax-hike for the poor and the middle class.

Then, on Friday, a week ago, as part of the budget deal lawmakers agreed that no additional federal funds would be used to hire new IRS agents. On Monday, the Government Accountability Office released a study showing that, as of the end of fiscal year 2010, roughly $330 billion in federal taxes had never been paid — an amount that, if collected, would represent nearly nine times the amount of savings as the budget itself! This, despite evidence that a single dollar spent on enforcing the tax code could result in up to ten dollars in revenue. The sacrificing of funds for IRS agents in the continuing resolution deal underscores a particular problem that seems bound to confront fiscally conscious lawmakers.

Senator Bernie Sanders

And then, many companies who made huge profits last year, did not pay any taxes. They hire tax accountants who find all the possible loop-holes. Senator Bernie Sanders (Ind – VT) published a list of the top ten companies who did not pay taxes this year. What they are doing is perfectly legal. But it is because of loop-holes in the tax-code that lawmakers are reluctant to fix. Here’s the list of some of the 10 worst corporate income tax avoiders.

1) Exxon Mobil made $19 billion in profits in 2009. Exxon not only paid no federal income taxes, it actually received a $156 million rebate from the IRS, according to its SEC filings. (Source: Exxon Mobil’s 2009 shareholder report filed with the SEC here.)

2) Bank of America received a $1.9 billion tax refund from the IRS last year, although it made $4.4 billion in profits and received a bailout from the Federal Reserve and the Treasury Department of nearly $1 trillion. (Source: Forbes.com here, ProPublica here and Treasury here.)

3) Over the past five years, while General Electric made $26 billion in profits in the United States, it received a $4.1 billion refund from the IRS. (Source: Citizens for Tax Justice here and The New York Times here. Note: despite rumors to the contrary, the Times has stood by its story.)

4) Chevron received a $19 million refund from the IRS last year after it made $10 billion in profits in 2009. (Source: See 2009 Chevron annual report here. Note 15 on page FS-46 of this report shows a U.S. federal income tax liability of $128 million, but that it was able to defer $147 million for a U.S. federal income tax liability of $-19 million)

5) Boeing, which received a $30 billion contract from the Pentagon to build 179 airborne tankers, got a $124 million refund from the IRS last year. . (Source: Paul Buchheit, professor, DePaul University, here and Citizens for Tax Justice here.)

6) Valero Energy, the 25th largest company in America with $68 billion in sales last year received a $157 million tax refund check from the IRS and, over the past three years, it received a $134 million tax break from the oil and gas manufacturing tax deduction. (Source: the company’s 2009 annual report, pg. 112, here.)

7) Goldman Sachs in 2008 only paid 1.1 percent of its income in taxes even though it earned a profit of $2.3 billion and received an almost $800 billion from the Federal Reserve and U.S. Treasury Department. (Source: Bloomberg News here, ProPublica here, Treasury Department here.)

8) Citigroup last year made more than $4 billion in profits but paid no federal income taxes. It received a $2.5 trillion bailout from the Federal Reserve and U.S. Treasury. (Source: Paul Buchheit, professor, DePaul University, here, ProPublica here, Treasury Department here.)

9) ConocoPhillips, the fifth largest oil company in the United States, made $16 billion in profits from 2006 through 2009, but received $451 million in tax breaks through the oil and gas manufacturing deduction. (Sources: Profits can be found here. The deduction can be found on the company’s 2010 SEC 10-K report to shareholders on 2009 finances, pg. 127, here)

10) Over the past five years, Carnival Cruise Lines made more than $11 billion in profits, but its federal income tax rate during those years was just 1.1 percent. (Source: The New York Times here)

Sanders has called for closing corporate tax loopholes and eliminating tax breaks for oil and gas companies. He also introduced legislation to impose a 5.4 percent surtax on millionaires that would yield up to $50 billion a year. The senator has said that spending cuts must be paired with new revenue so the federal budget is not balanced solely on the backs of working families.

Balancing the budget on the backs of the poor is immoral. But it is particularly egregious when

a. Bush-era tax cuts to the rich are more than the amount they are trying gap

b. Nine-times that amount is available in uncollected taxes, and

c. Major companies who make massive profits do not pay taxes because of loop-holes .

Jesus said, “The Spirit of the Lord is upon me because he has anointed me to proclaim good news to the poor.” (Luke 4:18)